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ZARAH NOTES Chattel Mortgage
ZARAH NOTES Chattel Mortgage
Special Laws
Maria Zarah Villanueva - Castro
4. The sale shall be made at public auction, the mortgage or without complying with the
between the hours or nine in the morning requirements of this Act.
and four in the afternoon; and shall be E. If the purchaser complied with the requisites
under the direction of the sheriff of the required by law, does the court has jurisdiction
province, the justice or auxiliary justice of to deny the same?
the peace of the municipality in which such NO. Under Sec. 7 of Act No. 3135, the court
sale has to be made, or a notary public of shall, upon approval of the bond, order that a
said municipality, who shall be entitled to writ of possession issue, addressed to the
collect a fee of five pesos each day of actual sheriff of the province in which the property is
work performed, in addition to his expenses. situated, who shall execute said order
B. In case of foreclosure sale, what are the immediately.
jurisdictional requirements?
Sec. 2 of Act 3135 provides that: “Said sale BULK SALES LAW:
cannot be made legally outside of the province
A. What are the transactions covered?
in which the property sold is situated; and in
1. Sale, transfer, mortgage or disposition other
case the place within said province in which the than in the ordinary course of trade and
sale is to be made is subject to stipulation, such business;
sale shall be made in said place or in the 2. Sale, transfer, mortgage or other disposition
municipal building of the municipality in which of all or substantially all of the business or
the property or part thereof is situated trade; and
C. In case of foreclosure sale, what is the period 3. Sale, transfer, mortgage or other disposition
of redemption? of all or substantially all of the fixtures and
equipment.
For Natural persons: 1 year from the date of
B. What are the transactions not covered?
the registration of the certificate of sale with
1. Sale by virtue of judicial order
the Register of Deeds. 2. Sale or mortgage is made in the ordinary
For Juridical persons: the right to redeem the course of trade and business
property is until, but not after, the registration 3. When accompanied with a written waiver
of the certificate of foreclosure sale which in no by the seller/mortgagor’s creditors
case shall be more than three (3) months after 4. Sale by assignee in insolvency or those
beyond the reach of creditors
foreclosure, whichever is earlier, as provided in
5. Sale of properties exempt from attachment
Section 47 of Republic Act No. or execution.
D. Is the purchaser entitled to possess the C. What are the obligations of the
property during the period of redemption? seller/mortgagor/assignor?
YES. Sec. 47 of the GBL provides that the 1. The person who shall sell, mortgage,
purchaser at the auction sale concerned transfer or assign stock of goods, wares,
whether in a judicial or extra-judicial merchandise, provisions or materials in bulk
shall give a written statement sworn of
foreclosure shall have the right to enter upon
substantially of the names and addresses of
and take possession of such property all creditors to whom said seller or
immediately after the date of the confirmation mortgagor may be indebted, together with
of the auction sale and administer the same in the amount of indebtedness due or owing,
accordance with law. Furthermore, Sec. 7 of Act or to become due or owning by said seller
No. 3135 provides that the purchaser may or mortgagor to each of said creditors to
petition the Court of First Instance of the the buyer.
2. It is also the duty of the seller, mortgagor,
province or place where the property or any
transferor or assignor to make a full
part thereof is situated, to give him possession detailed inventory and to preserve the
thereof during the redemption period, goods, wares, merchandise in bulk showing
furnishing bond in an amount equivalent to the the quantity and, so far as is possible with
use of the property for a period of twelve the exercise of reasonable diligence, the
months, to indemnify the debtor in case it be cost price of the seller of each article to be
included in the sale, transfer or mortgage.
shown that the sale was made without violating
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Commercial Law Review
Special Laws
Maria Zarah Villanueva - Castro
3. To notify the creditors whose name and 2. No payments may be made by the
address is set forth in the verified petitioner except in the ordinary course of
statement of the seller at least 10 days his business or industry; and
before transferring possession thereof,
3. Upon request to the court, all pending
personally by or registered mail, of the price,
terms and conditions of the sale. executions against the debtor shall be
4. The sworn statement containing the names suspended except execution against
and the addresses of all creditors must be property especially mortgaged.
registered in the Bureau of Commerce. E. What is double majority rule for proposed
5. The proceeds of the sale must be applied to schedule of liability?
all his credits pro rata. Sec. 8 (e) of the Insolvency Law provides that to
D. There is no violation of bulk sales law, can the form a majority, it is necessary that 2/3 of the
creditors may still go after the properties to creditors voting unite upon the same
enforce their claims? proposition and that the claims represented by
YES. said majority vote amount to at least 3/5 of the
Does it matter that the properties are in the total liabilities of the debtor mentioned in the
hands of the buyer? petition.
NO. F. Distinguish insolvency from suspension
*Bulk sales law applies even if there is an Suspension of Insolvency
agreement on how payment of the sale be Payment
made. The debtor has The debtor does not
*It doesn’t matter if the claim has not been sufficient property but have sufficient
reduced to judgment. he foresees the property to pay his
E. Purpose of the Bulk Sales Law: impossibility of debts
To prevent the merchants from evading in their meeting his debts as
obligations. they fall due
It seeks to prevent the defrauding of creditors The purpose is to The purpose is to
by the secret sale or disposal in bulk of all or suspend or delay discharge the debtor
substantially all of a merchant’s stock of goods. payment of debts from the payment of
certain debts
INSOLVENCY LAW:
The amount of Some of the creditors
A. What is the object of suspension of payment? indebtedness is not may receive less than
The object of suspension of payment is to seek affected their credits
postponement of the payment of debts in order The number of In case of involuntary
to provide the debtor a given period to convert creditors is immaterial insolvency, three or
some of his properties to cash. more creditors are
B. What is the financial condition of the applicant required
when he filed the petition for suspension of
payment? G. Distinguish involuntary insolvency from
The debtor has sufficient property to cover all voluntary insolvency
his debts but there is impossibility to meet Involuntary Voluntary Insolvency
them when they respectively fall due. Insolvency
C. Where do you file a petition for suspension of 3 or more creditors One creditor is
payment? are required sufficient
The petition is filed in the court of the province Filed by 3 or more Filed by the debtor
or of the city where the debtor resided for six qualified creditors
months next preceding the filing of his petition. Debtors must have No need for
D. What are the effects of the filing of a petition committed one or commissions of acts of
for suspension of payment? more acts of insolvency
1. No disposition in any manner of his insolvency
property may be made by the petitioner Indebtedness must Amount of
except insofar as concerns the ordinary not be less than indebtedness must
P1,000 exceed P1,000
operations of commerce or of industry in
Petition must be Bond is not required
which he is engaged; accompanied by a
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Commercial Law Review
Special Laws
Maria Zarah Villanueva - Castro
bond